"We do not expect the government to meet its disinvestment target this year. The condition of the domestic market is not conducive to any public issue," said a senior official in SBI Capital Markets. This State Bank of India subsidiary is one of the biggest merchant bankers in the domestic market, which has traditionally been associated with the disinvestment plan.

The SBI Caps views are in sharp contrast to those expressed by another leading merchant banker, ICICI Securities (I-Sec) -- the investment banking arm of ICICI. I-Sec has asked the financeministry to consider offloading public sector undertaking (PSU) shares in the domestic market with the PSU issues. The SBI Caps official said his organisation will advise the government to go slow with the plan of off-loading shares of five PSUs in the domestic market.

Finance minister Yashwant Sinha, in his budget speech, had said the government proposes to raise Rs 5,000 crore during the current year through disinvestment of shares of four public sector companies -- IOC, Concur, VSNL and Gail -- in the international and domestic markets. The Reserve Bank of India, in its annual report (1997-98) released last week, said the key to the centre's fiscal deficit is the success of the disinvestment programme. "The state of the market is not good. The Concur issue been postponed.

Internationally the markets are in a turmoil and it will be difficult to go for a GDR or ADR issue now. In the domestic market, the current appetite will not be able to take such large amounts," the SBI Caps official said.Accordingto him, the VSNL domestic issue, which is expected to hit the domestic market first, will be delayed and come in the market only if the PSU is able to reach an understanding with its employees on the issue of share-allotment. SBI Caps is the lead manager to the VSNL domestic issue. "Nothing will progress on this front till an agreement is reached with the employees," the source said.

The disinvestment plan has already hit a snag as the Concur GDR issue, which was slated to hit the market in early September, is being deferred by a few weeks.

The possibility of the disinvestment plans not meeting its target is likely to put a strain on fiscal deficit. "The budget has taken credit for an amount of Rs 5,000 crore from disinvestment. Unless this amount is realised, there would be further pressure on the borrowings and interest payments leading to a possible crowding-out impact on the private sector," the RBI said in the annual report.